Maligned Atlanta Streetcar may be the Worst Transportation Project Ever Built–Part 3: Federal Funding
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Maligned Atlanta Streetcar may be the Worst Transportation Project Ever Built–Part 3: Federal Funding

On Monday we provided an overview of the Atlanta Streetcar. On Tuesday we detailed its depressing history from its initial concept to startup to potential demise. Today, we will discuss the federal transportation grant strategy that created this monster.

Traditionally, state and local transportation projects have been overseen by state DOTs. DOTs by nature build roads. Many state DOTs also build or maintain transit services, rail lines, airports and bike trails, but those duties are secondary. Big-city leaders long have had a complicated relationship with state DOTs. Having lived in Chicago before his election, President Obama was more interested in central cities than other presidents. Many city leaders blame DOTs for having built Interstate highways through cities in the 1960’s, dividing inner city neighborhoods and depressing property values.

Senator Daniel Patrick Moynihan struck the first blow against DOT’s in 1991 by establishing a dedicated funding source for transit and mandating that metropolitan planning organizations (MPOs) take the lead role in selecting projects in metro areas. While that change, and the dedicated 20% funding for transit pleased most officials, major cities wanted more and they organized into lobbying teams to push for more.

Once the Obama Administration came into power, advocates for major cities saw their opportunity. They were initially disappointed in the administration. However, they came to see that the politically appointed leaders of USDOT lacked basic transportation knowledge. This proved to be an advantage.

Most transportation professionals were surprised that Ray LaHood, a backbencher from Illinois, was chosen DOT secretary. In fact, chief of staff Rahm Emanuel chose LaHood not because of his transportation background, but because he was Mr. Emanuel’s friend. It’s doubtful Mr. Emanuel would have selected LaHood to lead the State or Defense departments, and it clarified the low priority that the Obama Administration placed on transportation. And once in office, LaHood was more focused on enforcing White House norms at cocktail parties than addressing mobility. DOT leader LaHood failed to develop a long-term DOT vision, and also failed to create a realistic White House budget for transportation. (His successor Anthony Foxx has been a big improvement).

By March of 2009, central-city advocates planned to wrestle more funding and control from state DOT’s. The Obama Administration’s planned to spend billions to stimulate the economy. DOT Undersecretary for Policy Polly Trottenberg thought the administration could solve both problems with a grant process using selection criteria called the Transportation Investment Generating Economic Recovery (TIGER) grants. Unlike most federal money, which flowed through state departments of transportation or metropolitan planning organizations, smaller governments such as cities, counties, port authorities, and other political subdivisions would be eligible for TIGER grants.

The idea behind the TIGER Grants was not bad. A discretionary selection process, such as the TIGER grants, should be an improvement over the formula-based grants. Providing discretionary funding to critical national projects is good policy. Quantitative metrics are a good way to choose projects.

Unfortunately, the administration was never interested in a quantitative, discretionary process. They were not interested in providing funding to critical transportation projects. Awards for needed port projects, for example, were few and far between. Rather, they were interested in providing money to as many constituents as possible.

The political rush to fund projects turned into a disaster. As numerous General Accountability Office (GAO), Office of the Inspector General (OIG) and reports from other sources detailed, the TIGER Grants were disproportionately awarded to swing states, districts in swing states, Democratic districts and districts of Republicans on the transportation committee. Recommended projects were awarded more grants than Highly Recommended projects and senior political appointees routinely overrode transportation professionals’ recommendations.

One favorite of the Obama Administration is streetcar projects. Every round of TIGER Grants with the exception of 2011 has had at least one streetcar project. Streetcars should not be funded with transportation funds because they are neither transportation-related nor nationally-relevant. They are funded in the name of economic recovery. But as yesterday’s post shows, the actual economic development claims are often overblown.

The Atlanta Streetcar economic claims were so bizarre, the project never should have been considered. In its application, the city of Atlanta made a slew of mistakes. First, it confused jobs with job-years. If a project created 30 jobs over 30 years, that would be 900 job-years. The 900 number sounds much more impressive than the 30 number, but using the job years number in place of jobs is misleading. Second, the project claimed to create 4,000 jobs. But the project created only 467 temporary jobs to build the rail line and 23 permanent jobs to operate the streetcar. The temporary jobs created would spawn a few more jobs in service industry, but these, too, would be temporary and far fewer than the 4,000 claimed. Finally, the city failed to perform quality economic analysis of the project. This poor analysis was not unique to the Atlanta project. However, Atlanta with its 500,000 residents has the resources to perform quality analysis. Idaho Falls with 58,000 residents might not.

There are other deficiencies of the Streetcar project. But since the Obama Administration refuses to release the exact way it scores projects or any notes from the political team’s internal review process, despite being repeatedly admonished by GAO and OIG for failing to do so, we lack details on all projects. But we do know that the review team, composed of political members, has advanced poorly-scoring projects to meet geographical and political balance needs. Based on the economic analysis, the Atlanta Streetcar was a very poor project to fund. Georgia, then the ninth largest state by population, failed to receive any funding in the first round of grants primarily due to political reasons. So for political reasons the Obama administration repeated a wrong by funding an undeserving project in the second round.

The Atlanta Streetcar is a microcosm for the shortcomings of the Obama Administration’s federal transportation policy—past and present. The first DOT secretary was an expert on fashion, not transportation. The administration relies on political folks to make most of the transportation decisions. Transportation funds are seen as a way to fund economic development. Despite the importance of transportation to the nation’s economy, it comes up only in Presidential speeches, not actions. More on non-transportation projects receiving transportation funding early next week.

Baruch Feigenbaum is senior managing director of transportation policy at Reason Foundation and lead author of Reason's Annual Highway Report.